NEC talks on Lenovo mobile phone venture stalled: source

TOKYO

A logo of NEC Corp. is seen at Wireless Japan 2012, a smartphone and mobilephone technology exhibition, in Tokyo May 31, 2012.

Reuters/Issei Kato

TOKYO (Reuters) - Japanese electronics company NEC Corp's talks with Lenovo Group Ltd over a mobile phone venture have stalled due to disagreements over majority ownership and patents, a source familiar with the matter said on Wednesday.

The Nikkei business newspaper reported that NEC planned to exit its loss-making smartphone business after a mobile phone deal with Lenovo, already a partner in the personal computer business, failed to materialize.

The source said NEC was still considering several options, including talks with a potential partner other than Lenovo, or halting the development of new smartphones and focusing on its existing lines of feature phones.

NEC and Lenovo declined to comment.

China's Lenovo Group, the world's No.2 PC maker has been examining partnerships and acquisitions to expand in high-growth markets such as smartphones, tablets and enterprise computing, spurred by a decline in PC shipments.

NEC had been in talks with Lenovo since early this year on a possible sale or tie-up involving its mobile unit, NEC Casio Mobile Communications Ltd, according to media reports and a source familiar with the discussions.

NEC holds 70 percent of the unit, in which Hitachi Ltd also holds a stake.

NEC, once a major player in Japan's mobile phone market, has seen its market share slip to about 5 percent.

NEC's shares ended 4.8 percent higher at 242 yen after the Nikkei report, their highest in more than six weeks, compared with a 0.1 percent rise in the benchmark Nikkei average. Lenovo's Hong Kong-listed shares rose 0.7 percent. ($1 = 99.2850 Japanese yen)